What are Bonus shares?

What are Bonus shares?

Bonus shares are an additional shares allotted to the existing shareholders for free of cost. Bonus shares are given by the company when they are not in the position to pay dividend to its shareholders despite earning decent profits for that quarter.

The company who has earned massive profits or has large free reserves that cannot be utilized for any particular purpose and can be distributed as dividends can issue bonus shares. The bonus shares are given to existing shareholders according to their existing stake in the company.

For e.g. – A company issues bonus shares in the ratio of 5:1 i.e. a existing shareholder would get 5 bonus shares for every 1 share held.

What is Record date?

Record date is a date on which the shares of the company should be in Demat account.

What is EX date?

The Ex date is one day before the record date. Here an investor has to buy the shares at least one day before the Ex date to become eligible for bonus shares.

It is recommended to take the help of a financial advisor in making your investment decisions. This saves one from many meshes and the fee is nominal in comparison to the benefits advisory brings to the table. Write us info@lakshyainvest.com or go to Lakshya Invest  to avoid these common mistakes and keep a portfolio on track.

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